In December, the Bank of England reduced interest rates by another 50 basis points after it had cut them by 150 basis points in November. But the rate cut may even be larger. Economists "... expect the Monetary Policy Committee [MPC] to cut rates to 2.5 percent,"...while others "...saw a bigger 75 point cut"...or "a 100 basis point move. " Data show that "... inflation staged its biggest drop since records began ...potentially opening the door to even bigger cuts."
Reuters, 11/27/200
If the Bank's policies given above can the real long- term interest rate,the Bank will be able
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Question

Quizplus · Accepted Answer

Lowering interest rates typically leads to an increase in aggregate demand as borrowing becomes cheaper, leading to an increase in investments and consumer spending. This can help stimulate economic growth in the short term, but may also lead to inflationary pressures. However, as the article notes, the drop in inflation may allow for even bigger rate cuts without causing excessive inflation, further increasing aggregate demand. So, the Bank of England's policy is likely aimed at lowering interest rates to increase aggregate demand and stimulate economic growth.

In December, the Bank of England Reduced Interest Rates by Another